We have previously written about how the screws are tightening around Chinese companies from the Chinese state. Example of this is Alibaba (BABA US) founder Jack Ma surrendering control of the company. We have also covered the massive risk for international investors with the VIE structure of assets in China, with the arrest in the U.S. of JD.Com (JD US) founder on rape charges. It now appears that the Chinese government is stepping up its efforts to take control of Chinese companies. Most recently the head of Alibaba’s online video platform Youku was arrested on corruption charges. Scmp writes;
Alibaba Group named Fan Luyuan to lead Youku, its online video platform business, after police arrested former head Yang Weidong on suspicion of accepting improper payments.
Earlier in November South China Morning Post pointed out that the founder of JD.Com Richard Liu have been no show at various important Internet events in China. They noted;
Liu was not among the top private business leaders invited to meet with Xi at a symposium last month, which included the founders and chief executives of Tencent Holdings, Baidu, Xiaomi and Alibaba Group Holding.
He was also not among the Communist Party’s list of private entrepreneurs honoured for their contributions on the occasion of the 40th anniversary of China’s reform and opening-up. In late September, he was a no-show at the AI World 2018 conference in Shanghai.
It appears that U.S. authorities are stepping up their investigation about the rape charges as new information come to surface. Bloomberg writes;
JD.com Founder’s Rape Accuser Says She Was Lured to Dinner…. In the back of the car, he tried to kiss her and pull off her clothes, she said in her statement. “You have wife, and you have kids,” she told him. “Don’t do this, I don’t want to do this.” After she repeatedly asked him to take her back to her apartment, he relented.
The Minneapolis Police Department completed its investigation and in September turned the case over to prosecutors in the Hennepin County Attorney’s office, the county attorney said at the time. Prosecutors are now weighing whether to file criminal charges.
Recent arrest of Huawei’s CFO in Canada to be extradited to the U.S. has sent shockwaves in the market. The arrest makes it less likely that China will agree on any potential extradition of Liu if he is charged in the U.S. Potential refusal could result in U.S. authorities go after the founder’s assets in the U.S.
The Chinese government appears to be stepping up its efforts to fully control all Chinese companies through either arrest or restriction of movement for their leaders. This on top of taking control of various assets. With the arrest of Huawei’s CFO, these arrests and further control could spill over to the U.S. executives. Question is will the Chinese government actions increase and how that will affect both Chinese and U.S. companies.
